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HMRC internal manual

Compliance Handbook

Penalties for Inaccuracies: In what circumstances is a penalty payable: Introduction to penalties for inaccuracies

You must check the date from which these rules apply for the tax or duty you are dealing with. See CH81011 for full details.

HMRC is responsible for making sure that everyone pays the right amount of tax. Most people do pay the right tax at the right time and take care with the documents they submit. The purpose of the penalty provisions is to seek to influence behaviour by supporting those who try to meet their obligations and penalising those who do not. People expect reassurance from HMRC that there is no advantage for those who do not comply.

To provide this assurance HMRC will charge penalties where people

  • do not pay the right tax at the right time because they
  • do not take care with the documents they submit.

There are different circumstances under which HMRC may issue a penalty assessment. This guidance relates specifically to when a person does not take reasonable care, and carelessly or deliberately

  • understates the tax they owe
  • chooses to misrepresent their liability
  • overstates a claim, or
  • does not tell us when they have been under-assessed.

This guidance will help you

  • determine when a penalty for inaccuracy or failure to notify an under-assessment is payable, see CH81010 
  • identify the types of inaccuracies, see CH81100 
  • calculate the penalty due, see CH82000 
  • process the penalty, see CH83000, and
  • deal with appeals against a penalty, see CH84000.

We can agree to a special reduction of the penalty in special circumstances, see CH82490.

There is also guidance on miscellaneous issues that may affect the penalty, see CH84500.

The penalty provisions in Sections 100 to 103 of TMA 1970 do not apply to a penalty under Schedule 24 FA 2007.

There are also specific rules covering

  • how the penalty provisions apply in relation to agents and companies
  • what happens if a person incurs a penalty for an inaccuracy and other penalty on the same tax.

FA07/SCH 24